HBA-NRS H.B. 2102 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 2102 By: Eiland Insurance 8/7/2001 Enrolled BACKGROUND AND PURPOSE State law requires the commissioner of insurance to conduct hearings to determine benchmark rates under the flexible rating program. The average time span between the initial notice of a hearing until a rate is set is more than one year and, since rates are based on data from years prior to the start of this process, the rates may not reflect current market conditions. Allowing the commissioner of insurance to exercise rulemaking authority in setting benchmark rates and to determine and prescribe Texas Automobile Insurance Plan Association (TAIPA) rates would reduce the number of steps involved in the rate setting process. This would help reduce the gap between the effective date of new rates and the time period represented by the data used to set the rates. House Bill 2102 allows the commissioner of insurance to exercise rulemaking authority in setting benchmark rates and to prescribe TAIPA rates. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Section 3, Article 5.101, Insurance Code) of this bill. ANALYSIS House Bill 2102 requires the commissioner of insurance (commissioner) to promulgate by rule a benchmark rate for each insurance line subject to the flexible rating program after a notice and hearing and to have each flexibility band based on a benchmark rate promulgated by rule by the commissioner. In promulgating the benchmark rate, the bill authorizes the commissioner to give due consideration to expenses of operation of all insurers, excluding only those expenses that are disallowed under the flexible rating program. The bill requires the commissioner to request recommendations regarding changes to the benchmark rates before each annual hearing. Notice of each hearing involving benchmark rates must be published in the Texas Register and the bill requires the commissioner to receive public comment for at least 30 days after the notice of a hearing is published or at the hearing. The bill authorizes the public insurance counsel and any insurer, trade association, or other interested person or entity that has submitted proposed changes or actuarial analyses to ask questions of any person testifying at the hearing. After the hearing, the bill requires the commissioner to adopt a rule promulgating the benchmark rate. The bill provides that disallowed expenses include among other items any unreasonably incurred expense, as determined by the commissioner after notice and hearing in a proceeding separate from the hearing to determine benchmark rates by line (Sec. 3, Art. 5.101). The bill provides that the adoption of rules under agency actions affecting small businesses do not apply to a benchmark rate hearing. The bill removes provisions relating to discovery and evidence presented at a benchmark rate hearing (Sec. 5, Art. 5.101). The bill authorizes a person aggrieved by an order of the commissioner setting the benchmark rates to appeal the order not later than the 30th day after the date on which the commissioner issued the order. The bill provides that an appeal of an order of the commissioner setting the benchmark rates must be made in accordance with provisions relating to judicial review (Sec. 6, Art. 5.101). The bill requires the commissioner to determine and prescribe appropriate rates to be charged for insurance provided through the Texas Automobile Insurance Plan Association (TAIPA). The bill removes the provision requiring the commissioner to conduct a hearing on rates for insurance provided through TAIPA. The bill requires TAIPA to file its rates to be charged with the Texas Department of Insurance (department) for the commissioner's approval and prohibits TAIPA from filing more than once in any 12-month period. The bill authorizes TAIPA, the public insurance counsel, and any other interested person or entity that has submitted proposed changes or actuarial analyses to ask questions of any person testifying at the hearing. Before approving, disapproving, or modifying a filing, the bill requires the commissioner to provide all interested persons a reasonable opportunity to review and comment on the filing. H.B. 2102 requires the commissioner to schedule a hearing on the filing not later than the 45th day after the date on which the department receives the filing. The bill requires the department to file with the Texas Register a notice that a filing has been made no later than the seventh day after the date the filing is received by the department and specifies content the notification must contain. After conclusion of the hearing, the bill requires the commissioner to approve, disapprove, or modify the filing in writing. If the commissioner disapproves a filing, the bill requires the commissioner to state in writing the reasons for the disapproval and the criteria to be met by TAIPA to obtain approval. The bill authorizes TAIPA to file with the commissioner an amended filing for compliance not later than the 10th day after the date on which TAIPA receives the commissioner's disapproval. The bill sets forth provisions relating to an amended filing. The bill authorizes a person aggrieved by a decision of the commissioner regarding rates charged for insurance provided through TAIPA to appeal the decision not later than the 30th day after the date of the commissioner's decision. An appeal of the commissioner's decision must be made in accordance with provisions relating to judicial review (Sec. 5, Art. 21.81). H.B. 2102 authorizes the Texas Department of Insurance to continue to participate in a proceeding in which insurance rates are set past the present expiration date of September 1, 2001 (Sec. 37.052). EFFECTIVE DATE September 1, 2001. The Act applies only to premium rates for an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2002.